Who is the wonderful Wizard of Oz?

By Jon Stilwell

Mark Twain famously observed that “history doesn’t repeat itself, but it often rhymes.” Today we live in challenging times and people are being pushed to find the inner strength to confront their problems in a way that we have seen before.

The story begins between 1861–1865 when the United States government temporarily switched its money from being backed by gold and silver to ‘fiat’, paper money tenderly known as ‘Greenbacks’. This switch allowed them to print the money needed to pay for the Civil War effort without being constrained by the limited extent of their gold and silver reserves. But this switch it also resulted in a devaluation of the currency and an increase in the greenback dollar price of goods (inflation).

After the war, the government wanted to restore confidence in the monetary system through adopting the gold standard to remedy the inflation problems. Adopting the gold standard obliged the government, if requested by anyone holding dollars, to redeem them in gold at a rate of $20.64 to an ounce of gold. In order to maintain this promise, banks were forced to limit the supply of money so that the amount of dollars could easily be matched by their limited gold reserves.

At the time, the monumental gold discoveries in South Africa had not yet been made, and gold was globally much scarcer and its supply much more uncertain than it is today. This meant the government had to be extra careful about limiting the amount of money in the economy. Restricting the money supply worked perfectly in supporting the value of the dollar, but it forced prices down (deflation) with consumer prices falling by around a third between 1873 and 1896. This particularly hurt farmers who were often heavily indebted and felt the financial pain of falling income as the prices of their produce fell, while the extent of their obligations to their creditors remained high. They were forced to make do with less and this made them unhappy.

These dynamics are part of a common political economy problem where inflation is seen to favour borrowers but prejudice lenders. Conversely deflation is seen to favour lenders while prejudicing borrowers. The reasons for this are simple.

In an inflation environment the income of those selling goods and services often rises faster than their debt repayment obligations, making it easy(er) to repay loans. Conversely, in a deflation environment the income of those selling goods and services tends to fall faster than their debt obligations, making it hard to repay loans. Of course, these dynamics take on a spicy political dimension when borrowers are framed as ordinary people while lenders are framed as a corrupt and greedy elites.

The complex period in US political and monetary history during the late 1800s gave rise to a strong populist movement and has been the subject of great literary inspiration, including L. Frank Baum’s famous children’s novel The Wizard of Oz.

For those who haven’t read it (or if you just need a recap) the novel follows a young farmgirl named Dorothy through her journey from an ordinary life on a Kansas farm to the magical and scary land of Oz. The escapade begins when a tornado tears through Kansas swallowing up Dorothy and her dog Toto and magically transporting them to the enchanted land.

In Oz they find a Yellow Brick Road which they follow towards the Emerald City where they hope to find the Wizard whom Dorothy believes can help her to return home. When they eventually find the Wizard, he asks them to bring him the broom of the Wicked Witch of the West in return for his help. Along the way the pair meet a brainless Scarecrow, a heartless Tin Man, and a Cowardly Lion who accompany them.

After a series of adventures with these companions, Dorothy ultimately discovers that the power to return home lies simply in tapping her silver slippers together three times – a power that was within her grasp all along.

Her adventure is often seen by literary scholars as an allegory for the political economy of 1890s America. In their view, the Yellow Brick Road is the gold standard and Dorothy’s silver slippers (which were changed to ruby slippers for the Judy Garland film adaptation) are thought to represent the inclusion of silver as part of the bimetallic monetary standard.

The characters accompanying Dorothy and Toto have been likened to various interest groups of the time. The Scarecrow for example represents the indebted American farmer, the Tin Man the disempowered industrial worker, and the Cowardly Lion the political leaders lacking the courage to fight for their constituents. The Wicked Witch of the East is thought to represent the financial elite of the East Coast (not to be confused with the also-Wicked Witch of the West, or the good witches of the North and South!) while the Wizard is seen as an embodiment of the manipulative and deceptive political tactics of the time (incidentally Oz is also thought to be a reference to the abbreviation for ‘ounce’ – being the weight of a common denomination of gold or silver).

Dorothy’s quest cynically symbolizes the hope that ordinary people place in political figures, especially during hard times. The Wizard being exposed as just a small man pulling levers from behind a curtain provides a metaphor for authority figures failing to have solutions to social problems. However, the deeper meaning of the story is an empowering one. Instead of placing their hopes in artificial figures of authority, the story encourages individuals to look within themselves for the solutions that they desire, and the strength to confront their challenges.

But what is the relevance of any of this today?

To begin with, 2024 will go down in history as the biggest election year that the world has ever seen, with around half of the global adult population being entitled to vote. Political characters are possibly more manipulative and deceptive than ever. Aided by the wizardry of social media and its algorithms, they can craft irresistible and deceptive messages that, like the sirens in Homer’s Odyssey, prey on our inner vulnerabilities – providing a stream of personalised and enchanting misinformation that reaches deep into our psyches.

And the wizardry doesn’t end there. There are various shades of charlatans in all spheres of society pulling on these funny levers. These even include bullshit artists advocating for wonky alternative currencies, many of which have already crashed under the glare of regulatory scrutiny, taking ordinary people’s money with them. Like the 1890s, the misdirection is almost blinding on all sides of what seems to be an increasingly complex political prism.

Yet the deeper theme of the story is still the most relevant and powerful. Although we may not know the precise solutions to our problems, we know that looking within ourselves for the strength and courage to confront them are timeless tools that give us agency over them. Like Dorothy and Toto, when Odysseus and his men sailed past the island of the Sirens in The Odyssey, they too reached for the same attributes and prevailed in a story whose lessons have endured for not a hundred, but thousands, of years.

If you look past the noise, there is no fundamental reason why this time is any different. We might have to reach a little deeper than we’re used to, but in a society this bored with its own ingenuity, what could be a more wonderful adventure than that?